The Homa Files

Liberal economists say not to worry since interest rates are so low … take all the cheap money you can get.

So, the Feds have been piling on debt … at an average cost of about 2%.

Doing some arithmetic, the cost to service the debt is about $350 billion annually … about 10% of Federal spending.

Here’s the rub …

About half of the debt is short-term … less than 3 years.

Source: Strategic Research Partners

So what?

What if interest rates were to jump back to more historical levels …. say 6%.

Boom.

Suddenly, servicing the debt would have an annual downstroke of over $1 trillion.

Makes the Sequester look like a walk in the park, doesn’t it?

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This entry was posted on March 8, 2013 at 6:21 am and is filed under Debt - Deficit, Economy, Interest rates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.